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Friday, July 28, 2006

Rackable Getting Racked

Rackable Systems (RACK) is feeling the wrath of what can happen to high growth companies if they miss on any cylinders. The company beat estimates yesterday with $0.28 EPS vs $0.22 estimates and revenues were $88.64 million vs. $84.4 million estimates. The guidance is light, and that has shares down over 30% pre-market. The company forecast $0.18 to $0.21 EPS vs $0.21 estimates, and revenues at $80 to $85 million vs. $85.25M estimates. Its fiscal EPS targets were put at $0.98 to $1.02 vs. $0.96 estimates, and revenues for the year are put at $345M to $355M vs $345M estimates.

The company is blaming a slowdown in business with one of its largest customers due to decreased cap-ex spending. There was also a much larger portion of the income tied to interest income from its cash balance.

Even with shares down over 30% at $23.30, this is still nearly double from the 52-week lows. Rackable has also traded as high as $56.00 this year.

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